Weekly outlook: ECB rate decision; UK GDP and labour market figures

The key events for UK wealth managers for the week starting 9 September

This week has a macro focus with UK monthly GDP and unemployment featuring, but the main event is likely to be the European Central Bank’s (ECB) interest rate policy decision on Thursday.

Monday 9 September

– UK monthly GDP figures

Willis Owen head of personal investing Adrian Lowcock said expectations are probably for UK GDP to be negative again, but the first figures while headline grabbing, are “not particularly very accurate so need to be taken with a pinch of salt”. He said services are expected to slow which is likely to have a drag on the growth rate.

“What is unclear is the Brexit effect. This year has been driven by a Q1 stockpiling and Q2 drawdown of that stock pile creating some confusing figures. Will companies have begun stockpiling again?”

– UK manufacturing, construction and industrial production figures

– Japanese Q2 growth figure (final estimate)

Tuesday 10 September

– UK unemployment and wage growth numbers

Canaccord Genuity Wealth Management investment manager and international equity analyst Dan Smith said the UK jobs market has remained surprisingly resilient in the face of Brexit uncertainty.

He noted the UK economy has added jobs at a steady pace and wages grew at their fastest annual rate in 11 years in June at 3.9%. “The strength of the jobs market has kept talk of an interest rate cut from the Bank of England at bay,” he added.

“The unemployment rate ticked up slightly in June, largely due to an increase in the labour force, and a continued rise could see further downward revisions to UK growth forecasts. On the other hand, a positive reading, characterised by steady job creation and rising wages, may see investors take the view that the sentiment surveys are being overly pessimistic due to political noise, and the UK economy may hold-up better than the gloomy surveys suggest.”

Wednesday 11 September

– EU industrial production figures

– US Federal Budget deficit data

Thursday 12 September

– European Central Bank policy decision

AJ Bell investment director Russ Mould said this is ECB president Mario Draghi’s penultimate meeting at the helm before he steps way after eight years in charge to make way for France’s Christine Lagarde, but before he goes, markets are expecting the Italian to unleash a “big bang” of further stimulus.

“The ECB announced back in March that it would this month begin to offer more cheap credit to banks to try and get them to in turn lend out the money and boost growth, via a third round of its so-called Targeted Longer-Term Refinancing Operations (TLTRO).

On top of this, the ECB has at least two more policy tool in interest rates and more quantitative easing, said Mould. “The ECB last cut interest rates in March 2016 when it took the main refinancing rate to zero and the deposit rate to minus 0.4%.”

On the prospect of more QE, Mould said: “With many bond yields already at record lows and even in negative territory, it remains to be seen whether this will help or not.”

Friday 13 September

– US retail sales

Smith said: “There are increasing concerns that the US-China trade war and broader slowdown in global growth will push the US economy into recession. While some parts of the economy have been impacted, with business investment and manufacturing weakening, consumer spending has been resilient and kept the economy growing at a steady rate.

“Retail sales for July were exceptionally strong, as Amazon Prime Day (15-16 July) boosted online sales. Despite the strength in July numbers, retail sales over the month of August are expected to grow 0.2%, which, if materialises, should provide investors with some confidence that the consumer can continue to keep the economy out of a recession – at least in the short term.”

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